The operation of the company?s ?Mir 2? and ?World of Legend? role-playing games are at a ?mature stage,? Chief Financial Officer Richard Wei said in a conference call Thursday.
Second-quarter sales fell 4 percent to 1.11 billion yuan ($164 million) from a year earlier, leading to a 16 percent drop in profit to 304.3 million yuan, Shanda Games reported Wednesday. The Shanghai-based company increased spending to market new games to compete with rivals Tencent Holdings Ltd. and NetEase.com Inc.
Third-quarter sales may fall 5 percent compared with the previous three months, Wei said. In the three months ended Sept. 30 last year, Shanda reported revenue of 1.27 billion yuan.
Separately, parent Shanda Interactive Entertainment Ltd. reported second-quarter profit fell 60 percent to 168.8 million yuan from 426.9 million yuan a year earlier.

Net income increased to 485.7 million yuan ($71.6 million) from 468.1 million yuan a year earlier. Sales rose 54 percent to 1.35 billion yuan.

NetEase offered new games such as ?Heroes of Tang Dynasty? last quarter to meet rising competition from Tencent Holdings Ltd. and Shanda Games Ltd. in China?s $4 billion online-games market. The Beijing-based company won regulatory approval this month to offer an upgrade to its ?World of Warcraft? game, which may boost subscribers to the title by a third next year, according to UBS AG estimates. The upgrade will help NetEase win users of rival games, including Shanda?s ?Aion,? UBS?s Gary Ngan wrote in a report last month.

Revenue from online games advanced 51 percent to 1.18 billion yuan in the quarter, NetEase said. Sales from online advertising doubled, reaching 145.9 million yuan.
?World of Warcraft,? a multiplayer, role-playing game developed by Activision Blizzard Inc., accounted for about 30 percent of NetEase?s sales in the first quarter, according to estimates from IResearch.

The regulations, which also require online game companies to self-censor, will come into force on August 1 and apply to all domestic and imported role-playing and social networking games, the official China Daily said.
The measures, launched by the Ministry of Culture, aim to curb soaring rates of Internet addiction in China, particularly among minors.

According to the new rules, online users who want to play a game will have to go through a registration process with a valid ID, and game providers will also be banned from offering unsuitable games to minors, the report said.

China’s online population reached 404 million earlier this year, official data showed, and the number of young Internet addicts was estimated at around 24 million last year.

In a move seen as further tightening control of the Internet, state media reported last month that authorities would introduce a system requiring web users to provide their real names before posting comments online.

Consumer prices rose 3.1 percent from a year earlier, up from April’s 2.8 percent rate, the National Bureau of Statistics said Friday. Growth in investment and factory output slowed but still was at double-digit levels.

Rising inflation has prompted concern Beijing might hike interest rates or take other steps to cool growth that hit 11.9 percent in the first quarter. That could affect the United States, Europe and others that look to China to help drive demand for their iron ore, factory machinery and other exports.

Analysts expect China’s rapid expansion to slow as the initial impact of its 4 trillion yuan ($586 billion) stimulus wanes. The World Bank’s forecast for full-year growth is 9.5 percent.

Slower growth could complicate efforts to control prices because the standard tool of rate hikes might further chill economic activity.

May growth in investment in factories and other fixed assets – seen as an indicator of future growth – slipped from April’s 26.1 percent expansion to 25.9 percent, the statistics bureau reported. Growth in industrial output declined for a third month, falling to 16.5 percent from the previous month’s 18.8 percent expansion.

Total lending by Chinese banks in May shrank by 17 percent from April’s level to 639.4 billion yuan, ($93.6 billion), the central bank reported.

Growth in retail sales accelerated slightly in May to 18.7 percent from April’s 18.5 percent rate.

Revenue from online games rose 50 percent to 1.09 billion yuan in the quarter, NetEase said. Sales of online advertising more than doubled to 91.5 million yuan.

Profitability declined last quarter as NetEase incurred higher marketing expenses and royalty fees for its ?World of Warcraft? role-playing game, licensed from Activision Blizzard Inc. Gross profit margin for the online games division narrowed to 72.1 percent in the first quarter, declining from 90 percent a year earlier.

NetEase may consider a share buyback if the price is right, Ding said Thursday. The company?s cash holdings increased to 7.7 billion yuan at the end of March, compared with 7 billion yuan three months earlier, it said.

New user registrations would be halted for a week from Monday in the run-up to the Lunar New Year holiday, the company said in a statement posted on its WoW China website, www.warcraftchina.com on Sunday.

“We recently submitted our application to operate World of Warcraft (The Burning Crusade) to the General Administration of Press and Publication for review,” the company said.

Since last November, NetEase has been caught in the crossfire of an inter-government feud over regulation of the online game space.

The tussle resulted in China’s General Administration of Press and Publication returning NetEase’s application to operate the WoW expansion pack, ordering the company to stop charging users to play the game and disallowing new account registrations citing “gross violations” of regulations. But NetEase continued to operate the game as usual saying it was in compliance with local laws.

Uncertainty over the operation of the hit title, caused investors to sell NetEase shares, which fell more than 30 percent from a record high of $48.50 achieved in September last year.

Companies like Shanda Games, Perfect World and Changyou.com have tapped China’s huge pool of young Internet users with their games and raked in revenue from sales of virtual items. Players pay real-world cash for items like powerful magic weapons that help them defeat enemies, or for virtual clothing or pets to refine their online image.

Many popular online games in China draw on well-known cultural themes like martial arts or the wars of the nation’s ancient Three Kingdoms era. But China’s game companies face a new culture, different user preferences and competition from market leaders like Activision Blizzard as they work to expand in the U.S.

Shanda Games drew eyes last week by unveiling plans to acquire Mochi Media, a U.S.-based game network that Shanda says will distribute its games worldwide. Shanda, which like Changyou and Perfect World has raised funds by listing its stock in the U.S., will dish out US$80 million in the acquisition.

The move highlighted Shanda’s ambitions abroad. Shanda also has plans with local operators to offer six of its games in the U.S., said Diana Li, CEO of Shanda Games, in a phone interview. Li declined to name the games but said they would keep the free-to-play model they have used in China. By contrast, many U.S. games rely on subscription fees for revenue and do not sell in-game items for real cash.

Shanda’s popular titles include fantasy role-playing games World of Legend and Legend of Mir. Shanda is also looking at offering games in Europe, Li said.

Shanda rival Perfect World has already launched several games in the U.S. and offers them under altered names including Jade Dynasty and Ether Saga. Changyou late last year started open beta testing in the U.S. for Dragon Oath, a martial arts game.

Xu said, this investment had arrived, the funds will be used for next year development of new Social Game. About changing “steal vegetables” to “pick vegetables” to comply with the Ministry of Culture’s upcoming social game management policy, Xu said which had little impact on the business.

Statistics showed that Five Minutes is a Social Game developer and operator, focusing on providing the players with Social Game in line with the “Five Minutes” concept. Its representative work, “Kai Xin Farm” has achieved industry-leading positions in the number of active users, user activity degree and operating income.

Rumor said that Tencent one-time purchased Kai Xin farm games, Xu responded that it was a special cooperation way, and Five Minutes had no plans to sell the company or Kai Xin farm games currently.

Xu also said the special cooperation with some companies aimed to be more focused to make better Facebook overseas markets.